Are Homeowners Ready for Mortgage Benefit Changes?

Questions have been raised on whether homeowners are ready for the government’s upcoming changes on SMI, or “support for mortgage interest”, a benefit designed to help households struggling to meet their mortgage repayments.

The free benefit will now close in April 2018, with its replacement taking the form of a government-backed loan to be paid back with interest. The government says the new loan provides households with a safety net, but critics suggest this is merely saddling homeowners with a “second mortgage” to consider.

With these changes on the horizon, now is the ideal time for those without protection to consider what might happen if they had to rely on state support. Nobody wants to find themselves in a financially vulnerable situation, but circumstances can change quickly, and without cover in place households can find themselves struggling.

Why has the change caused concern?
The biggest worry for the industry is not the transition to the loan itself, but the low number of people that have signed up. One report showed that under 7,000 households had signed up to the new loan, a fraction of the 124,000 households that receive SMI.

Some experts want the government to delay the changes, to give people more time to sign up. The Department for Work and Pensions (DWP) has stated they are contacting all SMI claimants to ensure they are aware of the changes and point them towards the next potential steps.

How might this effect households?
Households could face genuine hardship and even repossession if they fail to complete the loan application process in time. To make matters worse, the previous 13-week waiting time on claiming for SMI has increased to 39 weeks, a significant period to be trying to cover household bills. Some experts suggest that possible increases in base rate may also see a climb in those relying on SMI.

To be eligible for SMI, a homeowner would need to be already receiving either Income Support, Income-based Jobseeker’s Allowance, Income-based Employment and Support Allowance or Pension Credit. But SMI will be unavailable to those with more than £16,000 in savings, which means without financial protection, hard-earned savings could be hit before any support is received.

How can I ensure I don’t need SMI?
This change has put even more emphasis on the importance of protecting household finances. But research by a leading provider indicated that less than half of homeowners have appropriate financial protection in place should they be unable to work, with just over 25% of the working age population having a savings buffer equivalent to three months’ income.

With a comprehensive protection plan, you can build your financial resilience to ensure you won’t need to rely on state support, or eat into your savings should your circumstances change. We can talk to you about your finances and help you ensure you do not find yourself relying on loans to fill the income gap left open by the unexpected.

£2m prize offered for rent check tool

A competition to develop a tool to record rental payments on credit histories has been launched by the Government,
with a £2 million prize going to the winning technology firm.

The competition was announced in the 2017 budget, as a part of the Government’s strategy to help more people onto the housing ladder.

What is it and how will it work?
Known as the Rent Recognition Challenge, the competition is looking for budding entrepreneurs to develop an application to enable the 11 million renters in the UK to record and share their rent payment information.

The six most promising proposals will receive grant funding to turn them into workable products, before being
narrowed down again to several teams who will develop the ideas into market-ready products.

How will it help turn renters into first-time buyers?
With the number of people renting increasing, and affordability issues still hampering first-time buyers, there have
been several requests for lenders to begin taking into account rental payments when assessing an applicant’s credit

Monthly rent is a tenant’s biggest outgoing payment, which makes it logical to use when assessing a mortgage
application. But lenders are currently unable to use this information and take rental data into account, just because
it is not accessible.

After vigorous campaigning and a Westminster debate on the issue, development on solving the problem is finally
underway. The Treasury’s competition will begin this year, with initial applications being accepted.

Do millennial parents really need life insurance?

A study of millennial parents has revealed some startling statistics and attitudes towards life cover. Three quarters of
young parents said they have no life insurance in place to cover them should the worst happen. Despite how much
of an impact this can have on those left behind, 67% also said that they simply did not have time to go through their

What is life insurance?
Life insurance delivers the peace of mind of knowing your loved ones are financially protected should the worst
happen. Life cover normally comes in the form of “term insurance”, which covers the policy holder for a set period of
time, normally around 30-35 years.

If you were to die during the policy’s term, your family will receive a pay out of a lump cash sum, or alternatively a
regular income that can be used to pay off an existing mortgage or other bills.

Why don’t more millennial parents have it?
Generally, younger parents will always feel that life insurance is less of a priority than older generations, simply
because they are less likely to die anytime soon. Currently, millennials would rather spend their funds on new
technology and experiences, than on insurance against future events.

When asked, many millennials also assumed that life insurance was simply too expensive to consider, with 80%
prioritising other financial needs, such as living expenses, recreational expenses, and saving money for the future.

Life stages, such as buying a house, are being reached much later by millennials. This means that many young
parents are left vulnerable while renting, without having had the life insurance conversation with their mortgage

Why is it such a good idea for millennials?
One of the reasons millennials should be considering life insurance is their age. Life insurance is often cheaper when
you are younger, which means putting it off only increases the cost of the monthly premiums.

If you have dependents and people that rely on you, then you need to consider what would happen if your income
was suddenly taken out of the picture. Would they be able to live comfortably? Would they have the same lifestyle?
Moreover, would they have the stress of financial worries piled onto the difficulty of dealing with your death?

If you would like further advice on life insurance cover, speak to on of our advisers today!

5 Factors that will Affect Housing in 2018

It’s time to gaze at the crystal ball and make predictions for the housing market in 2018. So what do we think are the
big factors that could affect homeowners, first-time buyers, and property investors this year?

Rates – Interest rates have become a hot topic after the Bank of England’s Monetary Policy Committee raised the
base rate from 0.25% to 0.5%. Although not a big climb, another increase is possible at some stage.
This would affect borrowers on standard variable rates and tracker deals, with those on a £175,000 tracker mortgage
seeing £22 added to their monthly repayments if the base rate increased to 0.75%. But borrowers on fixed rates will
of course see no change.

Housebuilding – Although a slightly maligned sector in recent years, government policies have helped drive a new
wave of housing development, with 217,000 homes coming onto the market in 2016-17.
This is up an impressive 20% on the year before, albeit still short of the government’s target of 300,000 homes a
year. But there are several indicators, such as increased construction activity, which suggests the numbers may
improve again in 2018.

Brexit – There are conflicting reports on how Brexit may affect the housing market this year. But the uncertainty
surrounding Brexit could very well have an effect on consumer behaviour, which means another unpredictable year
in store for homeowners and first-time buyers.

Buy to Let – As well as the next stage in the reduction of tax relief, there are now two more big changes coming the
way of landlords. From April, all landlords of Houses of Multiple Occupation will require a license, previously only
applied to those with property housing 5 or more unrelated occupants.
April again will see the beginning of new rules regarding Energy Performance Certificates, or EPCs. It will be now
unlawful to let or lease a residential or commercial property that has an EPC rating of F or G, which may cause
problems for landlords letting out a house or flat that does not have the required rating.

Housing Policies – The government’s flagship budget announcement that stamp duty has been abolished for first
time buyers on properties valued up to £300,000, will certainly help first-time buyers in 2018.
The Help to Buy Equity Loan, boosted in the budget with an extra £10bn of funding, will continue to support first time buyers. Young savers will also continue taking advantage of the Help to Buy ISA, which boosts savings by 25%
on monthly deposits of up £200.

If you would like further advice and information, speak to on of our advisers today!

A Beginner’s Guide to Life Insurance

Life Insurance is there to ensure your family is financially secure should something happen. But knowing that is just the start…

What exactly is Life Insurance?
For a surprisingly affordable monthly premium, Life Insurance delivers the peace of mind of knowing that should you die, your family will either have a lump cash sum, or a regular income, which can be used to pay off an outstanding mortgage or support them with paying monthly bills.

Term Life Insurance is the simplest and most affordable type of Life Insurance, designed to protect you for a set period of time. This is normally used to cover the mortgage, which is itself often limited to around 30-35 years. If you die during the policy’s term then you will receive a pay out, if you live beyond this point then the policy will end.

What are the different types of Term Life Insurance?
There are various types of Term Insurance, designed to deliver the most suitable cover for you.
Family Income Benefit: Instead of a lump sum, this policy will pay out a regular income to help cover monthly payments and bills.
Level term: The amount of cover and total pay-out remains the same for the policy’s term.
Decreasing term: The total pay-out will reduce over the term of the policy. This can be suitable to take out alongside a decreasing loan such as a mortgage.
Increasing term: The amount of cover and premiums increase over the term. This can be suitable to combat the rise in inflation and the cost of living, as well as changes in circumstances.

What is an impaired life?
This is a term used to describe someone whose current circumstances would cause the underwritten premiums to be higher than a standard application. This can include not just medical and physical conditions, but the lifestyle or occupation of the applicant as well.

An application may be impaired for several reasons. This can include pre-existing medical conditions, hazardous occupations, or those that take part in high-risk hobbies. If you think you may have an impaired life, we can work through the provider options with you, as there are several that specialise in this area.

What else do I need to know?
It is often a good idea to buy Critical Illness Cover alongside Life Insurance, to ensure a comprehensive level of protection. Critical Illness Cover will provide a cash lump sum, should you be diagnosed with a critical illness such as cancer, heart attack or stroke. Life and Critical Illness cover can either pay on a first instance basis, or on the event of both diagnosis and death.

Life Insurance policies can also be written into Trust, which means it will not form part of your estate and therefore not be liable for Inheritance Tax (IHT). It is important to get tax advice before making any decisions regarding your tax options, but we can point you in the right direction.

If you would like to discuss your life insurance options then speak to one of our advisers today!

Do you know what your credit score is?

Your credit score can affect your ability to borrow money or access products such as credit cards and loans. Everyone can check their credit score for free. One of the easiest ways to check your score is through an online agency such as Experian or Equifax. If it looks like your score isn’t as good as it could be, don’t worry, there are ways you can improve it!

How can I improve my credit score?

  • Register on the electoral roll – if you are not registered to vote then you will probably find it harder to get credit. It is easy to register on the electoral roll by post or online.
  • Correct any mistakes on your file – it is important to check all your details are correct because even a small mistake could have an impact on your score. It is also important to ensure all your personal details are correct, including your name and address with your local authority and government bodies.
  • Pay your bills on time – by paying for your bills on time you are proving to lenders that you are able to manage your finances well.
  • Check if you are linked to another person – if you are linked to someone else’s credit rating through means such as a joint account, their credit rating could affect yours.
  • Check for fraudulent activity – if something appears on your credit report that doesn’t apply to your activity, it may be a sign of fraudulent activity. If this is the case you should contact the credit reference agency and any other relevant bodies such as your bank to inform them.
  • Manage your debt – if you are struggling to manage your existing debt, you should seek debt advice. This is important because you don’t want to be issued with a County Court Judgement (CCJ) as it would have a huge impact on your credit score.
  • Reduce your debt – if possible you should reduce any remaining debt before applying for more credit. This is because lenders will usually hesitate to lend you more credit if you already have high amounts of existing debt.
  • Stay in one place – lenders prefer to see that you have resided at one address for a substantial amount of time.

How long will it take to improve my credit score?

Your credit history is built up gradually over time as you increase the amount of payments you make on time. If you have a negative mark on your history, such as a CCJ or late payment, it will usually stay there for at least 6 years. However, if this is the case there are still options available that we can help you with.

If you would like to discuss your credit score and its effect on what mortgage you could obtain then speak to one of our advisers today.

Are you covered for Christmas?

Christmas is a wonderful time for present giving, with the average UK household spending a massive £473.83* on presents every festive season. But this also makes it a good time for burglars as well. This is because the value of your home contents goes up, making it a bigger incentive for opportunist criminals.

Burglary is an invasive and upsetting crime, so it’s important to make sure you don’t have the added financial stress of replacing all those gifts around the tree. Fortunately, it is common among general insurance providers to automatically provide extra cover at Christmas. Many standard home insurance policies increase their cover by around 10%**.

But some don’t do this as part of their standard policy, so it is worth checking with your insurer. You may also want to consider whether a house full of presents has exceeded the claim limit on your policy.

This could include high value single items such as the newest gadgets, which may be worth more than the maximum claim allowed on single items. It is well worth taking the time to find out from your insurer exactly how they support you over Christmas.

If you don’t yet have contents insurance, or simply want to discuss whether your existing policy is right for you, then we can work through your options. We want you to relax at Christmas and enjoy your holidays, without the added worry of being protected.

If you would like advice on taking out or reviewing your home insurance policy then speak to one of our advisers today!

*Telegraph 2016 **Policy Expert

Give the gift of a deposit this Christmas!

What is a gifted deposit?

A gifted deposit is a sum of money that is given by somebody, usually a family member, which forms all or part of a deposit for someone buying a property.

What do you need to know?

  • It is important to remember that if you gift a deposit, it is just that, a gift. This means you will be required to sign a written declaration that states it is a gift and that the home buyer is not required to pay it back.
  • If you plan to give a gifted deposit you should seek independent advice to ensure you understand you will not have an interest in the property or the right to get your money back.
  • Most lenders will accept gifted deposits from close family members and a few will even accept gifted deposits from more distant relatives and friends.
  • The lender or solicitor may request to see a bank statement or other documentation to evidence where the gifted deposit has originated from.
  • A gifted deposit can be used alongside the applicant’s own savings or the Help to Buy scheme.

What are the alternatives to gifting a deposit?

There are many other ways parents can support their children when purchasing their first home and different ways borrowers can maximise their savings for their deposit.

  • Low-deposit mortgages – the availability of products that offer a 95% or 90% LTV has substantially increased. This means that mortgages are now more accessible for buyers with smaller deposits.
  • Guarantor mortgages – parents can be named on the mortgage to enhance the affordability for the first time buyer. They can also offset their savings or even take out a joint mortgage with their children.
  • Government schemes – if the buyer can’t be helped by their family, government schemes such as Help to Buy or Shared Ownership could be good options.
  • Help to Buy ISA – as well as the government schemes listed above, a Help to Buy ISA could assist the buyer in saving a larger deposit. The Help to Buy ISA provides a 25% bonus to first time buyers on a limited amount of savings when it is being used to purchase a house.

If you would like more information about giving a gifted deposit or other options for first time buyers then speak to one of our advisers today.

Should you get a Single or Joint Life policy?

Wanting to secure your loved ones’ future is something we can all relate to. It’s common sense to want to ensure that should the worst happen, they will be financially covered to cover costs such as mortgage repayments, childcare and funeral expenses.

Making life cover part of your financial plan is a big step towards that peace of mind. But if you are married or co-habiting, you may be asking yourselves an obvious question: Is it better to get two single life policies or a joint policy together?

As a couple, it might be instinctive to opt for a joint policy. But when making such an important decision, there are other things to consider. Here is a quick guide to some of the key things you may like to think about before coming to see us to discuss the next step…

Joint Policy:

  • Covers two lives in just one policy
  • Joint policies tend to be cheaper
  • Payout is normally claimed upon the “first death” only, but can be set up as “second death” which pays out when both policyholders die
  • Joint cover may not be suitable in the event of separation or divorce
  • Joint policies are not normally written in Trust as the policy usually pays out to the surviving partner as a ‘transfer of assets between spouses’, which is exempt from Inheritance Tax
  • Terms consider both parties and therefore partners won’t get individual terms as part of a joint life insurance policy
  • If both parents died, children would only get one payout

Two Single Products:

  • Two separate policies covering two separate lives
  • Two single policies are likely to cost more
  • Payout can be claimed on both lives, which will ensure the surviving person is not left without life cover, which may have higher premiums due to age or changes in health
  • Easier to keep covered in the event of separation or divorce
  • Single life policies can both be written in Trust. This means each of you can decide where the money goes on each policy. This will also avoid probate and Inheritance Tax (IHT)
  • Can be tailored to each individual’s needs and terms will reflect each partner’s circumstances and health
  • In the event of death of both parents, the children would receive two payouts

Whether you opt for a single or a joint policy can be based on many factors, all of which we can go through together with you and your partner. It also a good idea to add some critical illness cover to your policy, as well as child’s critical illness cover where suitable. Contact us today to arrange a meeting to discuss your protection needs.

Beginner’s Guide to Income Protection

What is income protection?
Income protection, commonly known as IP can provide monthly tax-free payments that replace part of your income. These payments help ease any financial hardship if you’re not able to work.

The cover usually pays out until you are able to start working again or until the end of the benefit or policy term. You can claim multiple times during the term of your policy.

You can also take out budget income protection which usually costs less but the payment period is limited for each claim.

Why should you take out income protection?
In the UK nearly a million people find themselves unable to work because of serious illness or injury every year (ABI 2015).

If you become unable to work, would you cope by surviving on your savings, sick pay or on state support, which is currently as little as £57.90 a week? If not, it is likely you will require an alternative way to continue to pay your essential bills and it may be worthwhile considering income protection.

How much does income protection insurance cost?
The cost of a policy will vary depending on various factors such as:

  • Age – usually the older you are the more you will have to pay for income protection.
  • Job – you may be asked to provide details on your job. If your job involves extra risks such as working at heights it is likely that you will have a higher premium.
  • Occupation definition – if your policy covers your own occupation it means you will be covered if you have been declared medically unable to do your own job. If you want to pay a lower premium you could opt for any occupation which means you won’t be covered if you are still able to work in any job or suited occupation which means you will be covered if you can’t work in a job similar to yours.
  • Smoker status – some providers will want to know your smoker status, if you are a smoker you may have to pay a higher premium.
  • Health – if you are in good health, have a low BMI and no family history of health risks your premium should be more favourable. However, some providers don’t take health into consideration.
  • Income to be covered – the higher your salary, the more income protection will cost you each month.
  • Waiting period before the policy pays out – you generally set payments to start after your sick pay comes to an end. The longer the waiting period, the lower the monthly premiums.
  • Range of illnesses and injuries covered – generally the more the policy covers, the greater the premium will be.

Payment Protection Insurance is optional. There are other providers of Payment Protection Insurance and other products designed to protect you against loss of income.

If you would like advice on taking out or reviewing your income protection policy then speak to one of our advisers today!